By Bill Broich
Questions can be your strongest asset when considering your important retirement money. Asking how, what, when, where and why can lead to dramatic results when asking about money.
• How are my important retirement funds going to respond to market risk?
• What are my options for eliminating unnecessary market risk?
• When will I be able to convert my retirement funds into a pension?
• Who guarantees the pension benefits?
• Where will my money be invested? Will there be any chance of losing it?
• How will inflation affect my retirement income?
If you are considering an annuity and not quite sure if it is the right decision for you ask questions. Not sure exactly what to do, which policy to buy, what benefits to ask for or do you even know what to ask for? Annuities can seem confusing when actually they are rather simple.
Would you like to know what questions to ask? Here are basic questions which to ask.
What is the financial rating strength of the annuity company? Ratings are important but not as important as you might think. Throughout history virtually no one has ever lost any money on deposit in a fixed annuity. The reason I say almost is a few years ago, Executive Life in California failed and some of their contacts are still in litigation. But their case is a rarity, insurance companies are so heavily regulated that failure really is not in the equation. Any company with an AM Best rating of B+ to A is in my book a solid bet. Always ask and double check their ratings by visiting AM Best Company at www.ambest.com
Ask about withdrawal options, if you need your money how can you get it and what are the details? Many people think buying an annuity is losing control. Almost without exception every fixed annuity has some access to the money, some are 10% per year without penalty, and others even more. Annuity contracts can be different, make sure you fully understand this important provision. Always ask what percentage you are allowed to withdraw annually. Also, all annuities will waive surrender fees at the death of the annuitant so your named beneficiary can receive the full value of the annuity, without any reduction in funds.
Does the annuity contain an income rider? An income rider can provide retirement income for as long as you and your spouse may live. Are there fees and charges to add an income rider? Are the fees waived if the income rider is used? How much income is available and it fully guaranteed in the contract. What is the worse thing that can happen to you regarding income?
Is there a bonus offered to me if I buy the annuity? Bonus are often offered as an inducement to buy, what are the details? These are real money and will be added to your account, however, make sure you understand exactly how the bonus will be applied. In almost all cases, the bonus is credited over time and as long as you fulfil the time period of the annuity contract, the bonus is yours, but always ask for the explanation and the details
Annuities are very popular simply because they are market risk free and the management is outsourced to an insurance company. But, annuities are not for everyone, in many cases they will not provide the expected benefits and in many cases they are perfect. It all depends on your personal situation and your individual goals, ask questions!